With careful Inheritance Tax planning, you can give a gift this festive season that keeps on giving. Calum Lockhart, Chartered Financial Planner, explains how to ensure more of your wealth passes on to those you care about.
- Understand your IHT Liability
IHT can take up to 40% of your estate. Understanding the value of your estate and potential IHT exposure is the first step in protecting your legacy. Review your estate’s worth and consider the impact that IHT could have on your family’s inheritance. - Start making gifts during your lifetime
Gifts made more than seven years before death are exempt from IHT. Consider gifting assets now to reduce your estate’s taxable value. - Take advantage of exemptions and reliefs
Use IHT exemptions like the £3,000 annual gift allowance, wedding gifts, and charity donations. Reliefs like Business Relief and Agricultural Relief can further reduce your estate’s IHT bill. There is also a ‘normal expenditure out-of-income’ exemption which allows regular gifts to be immediately excluded from your estate, as long as the relevant conditions are met. - Make the most of the Nil-Rate Band and Residence Nil-Rate Band
The Nil-Rate Band (NRB) lets you pass on £325,000 without tax, and the Residence Nil-Rate Band (RNRB) adds £175,000 for the family home passed to direct descendants. A married couple or civil partners can therefore leave up to £1 million without paying any IHT. These exemptions can save a significant amount of tax, so ensure you’re using them effectively. Anyone with a net estate over £2 million will begin to see their RNRB reduced by £1 for every £2 over this threshold. - Consider Trusts and life insurance
Trusts can be used to pass wealth efficiently and mitigate IHT. Explore life insurance policies designed to cover IHT liabilities, ensuring beneficiaries receive the full value of the estate. - Review and update your Will regularly
A well-structured Will is crucial in ensuring your wishes are honoured and that your estate is distributed in the most tax-efficient way possible. Regular reviews are essential, especially if your financial situation changes.
Why financial advice is key for IHT planning
IHT planning can be complex. Here’s why financial advice is essential:
- Navigating complex tax rules
IHT rules can be intricate, with various exemptions, reliefs, and allowances to consider. Your Origen financial adviser helps you understand these rules and how they apply to your specific situation, ensuring that you don’t miss opportunities to reduce your tax liability.
- Tailored solutions for your estate
Every estate is unique, with different assets, family dynamics, and financial goals. We will create a customised IHT strategy that takes into account your personal circumstances, ensuring that your planning is both efficient and aligned with your values.
- Minimise potential tax liabilities
At Origen, we help you identify tax-efficient strategies, such as gifting, using trusts, or considering life insurance options, to reduce the overall IHT burden on your estate, preserving more wealth for your beneficiaries.
- Understanding the impact of gifts and trusts
While gifting and setting up trusts can be powerful tools to reduce IHT, they can also have complex tax implications. Your Origen adviser can guide you on the rules around gifts (e.g. the seven year rule) and how to structure trusts to meet your family needs, without unintended consequences.
- Up-to-date knowledge of legislation
IHT legislation is subject to change, and what worked well last year may not be as effective in the future. We stay current with tax laws and can advise you on how to adapt your strategy in response to legislative changes.
- Peace of mind
IHT planning can be overwhelming, especially when dealing with family wealth and multi-generational concerns. Having a trusted adviser gives you peace of mind, knowing that your plan is tax-efficient, legally sound, and aligned with your long-term goals.
Financial planning actions to consider
- Establish a comprehensive estate plan: Work with your Origen financial adviser to assess your estate’s value and IHT exposure.
- Maximise tax exemptions: Make regular gifts within the annual exemption limits and consider large gifts within the seven year window.
- Set up a trust: Consider creating a family trust to pass on wealth to beneficiaries while reducing IHT.
- Review your life insurance policies: Ensure you have policies in place to cover any potential IHT bill.
- Update your Will: Make sure your will reflects your current wishes and any changes in your circumstances. Would you like to dive deeper into any specific aspect of IHT planning?
This festive season, consider giving a gift that lasts. With careful planning, you can reduce your IHT liability and ensure your legacy benefits your loved ones for years to come.
This article is intended to be for information only and should not be taken as financial advice. Capital is at risk. Before you take any action you should seek advice to check the suitability and tax consequences of any actions that you plan to take.
CA13226 Exp:12/2026
